Mortgage Rate Forecast

Over the last 25 years, a key indicator of interest rates, the Reserve Bank of Australia’s cash rate, has fluctuated between 2.5% and 17.5% per annum. Since August 2013, the rate has remained unchanged at its record low of 2.5% and although it should remain steady, its next move is likely to be up.

The Reserve Bank of Australia alters interest rates with the aim of achieving their target levels of sustainable growth in both demand and inflation. Since the start of 2014 growth has become firmer with moderate growth in consumer demand as well as a strong increase in housing construction. Property prices have increased significantly over the past year, rising an average of 10.9% across Australian capital cities from March 13 to March 14 according to ABS figures. However, there are some signs of a moderation in the pace of the recent growth.

The Governor of the Reserve Bank, Glenn Stevens, announced that the current monetary policy should support demand and help strengthen growth whilst keeping inflation consistent at 2-3% over the next two years. The board recently announced, “Given this outlook for the economy and the significant degree of monetary stimulus already in place to support economic activity, the board judged that the current accommodative stance of policy was likely to be appropriate for some time yet”.